1 Undervalued Canadian Stock Playing the Data Centre Theme

Artificial intelligence (AI) data centres need power, certainly. We all know that by now. But they also need pipes.

No, not water pipes (although cooling matters, too); they need digital pipes: fibre, secure private networks, business internet, low-latency connectivity, and reliable broadband infrastructure. That’s why Cogeco Communications (TSX:CCA) deserves a closer look from investors hunting for an undervalued Canadian stock tied to the data centre theme.

This isn’t an obvious AI stock. Cogeco doesn’t make chips or build servers or own the hottest AI platform. It’s a telecom and cable company serving residential and business customers in Canada and the United States. That’s exactly why the opportunity looks interesting.

CCA

Cogeco stock provides internet, video, and phone services through its Canadian Cogeco Connexion business and U.S. Breezeline business. In Canada, it operates mainly in Ontario and Quebec. The company serves about 1.6 million residential and business subscribers across its footprint.

The data centre link comes through connectivity. Every AI facility needs a lot of bandwidth for moving in and out. Cloud providers, enterprises, and local businesses all need secure, fast, reliable networks. Cogeco stock’s business services include fibre ethernet private networks with dedicated access and speeds from 10 megabits per second to 10 gigabits per second. That kind of infrastructure may not grab headlines, but it sits close to the real-world buildout.

Canada’s AI infrastructure push also makes the theme more timely. The federal government has been engaging with industry on large-scale sovereign AI data centre projects. Those projects won’t just need land, power, and chips but will need connectivity to users, businesses, cloud systems, and other networks. Cogeco stock can provide a lot of that support.

Into earnings

Yet Cogeco stock also looks undervalued compared with many higher-profile Canadian telecom names. Investors have been wary because revenue is under pressure, especially in the U.S. business. In the second quarter of fiscal 2026, Cogeco Communications reported revenue of $693.6 million, down 5.3% from last year. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also declined 5.3% to $337.7 million.

That’s not a growth-stock profile, but the business still produces substantial cash flow, and the valuation reflects plenty of pessimism. The dividend is another reason to pay attention. Cogeco stock pays $0.987 per share quarterly, or $3.948 annually, coming to a yield of around 6.3%. For a company with essential broadband assets, that’s meaningful income. What’s more, Cogeco stock has continued to raise its payout, including a 7% increase in fiscal 2026. That makes the stock appealing for investors who want income while waiting for the market to revalue the business. Even now, here’s what $7,000 could bring in.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTCCA$63.60110$3.95$434.50Quarterly$6,996.00

Looking ahead

Of course, the risks are real. Cogeco stock faces tough competition from larger telecom companies, fibre overbuilders, wireless substitutes, and aggressive promotional pricing. Its U.S. segment has been weak, and management lowered expectations for fiscal 2026 earlier this year. If broadband subscriber trends worsen, the stock could stay cheap for a reason.

Investors also need to be precise about the data centre angle. Cogeco stock sold its Cogeco Peer 1 data centre and cloud business years ago. So this isn’t a direct data centre landlord or operator, but a connectivity play.

Yet that still has value. As AI infrastructure spreads, the surrounding network becomes more important. Data centres need to connect. Businesses need more secure bandwidth. Regional markets need better digital infrastructure. Cogeco stock already owns and operates networks that can serve those needs.

Bottom line

For investors, the appeal is simple. Cogeco stock offers a high dividend yield, a discounted valuation, essential telecom assets, and a practical link to rising data demand. It won’t move like a pure AI stock, and it shouldn’t be treated like one. But for a patient investor looking for income, value, and exposure to the less glamorous side of the data centre buildout, Cogeco stock looks like one worth watching.

The post 1 Undervalued Canadian Stock Playing the Data Centre Theme appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Cogeco Communications. The Motley Fool has a disclosure policy.